Savita Subramanian this morning:
We looked at sentiment changes in the months leading up to presidential elections since 1988 and found that Wall St. tends to get bullish in Oct. following bearishness in Sept. During election years, sentiment has tended to drop by 57bp in Sept., on average, and rebound by 46bp in Oct. In the eight prior elections, sentiment was higher in 25% of cases in Sept., 75% of cases in Oct., 63% in Nov., and 50% in Dec. And in ‘00, the last contested election, sentiment rose by over 300bp from Sept through year-end. Note the S&P 500 fell by ~5% from the election to the Supreme Court decision in early Dec.
Savita notes that Wall Street’s sentiment, as measured by consensus equity allocations, is now back to pre-COVID levels for the first time since the pandemic began, but is nowhere near what would be historically significant euphoria. Guarded expectations on Wall Street are your friend. They are the metaphorical wall of worry that stocks climb and we need that wall in place now more than ever before.
Sentiment ticks up
Bank of America Merrill Lynch – October 1st, 2020